Around 15m energy customers will see their bills increase to at least £139 under the current price cap which will be “pretty difficult for customers to manage.”
Ofgem has warned there is no end in sight to this crisis, who said that wholesale prices will hit household bills, and they insist the costly price cap is “good value.”
Ofgem’s CEO, Jonathan Brearley, told Holyrood’s energy committee it is “too early to tell” how the crisis will effect energy bills in the long term.
Brearly told MSPs, “We have seen unprecedented changes in the gas price, and that is putting strain on the wholesale market.
“There is still change in the market and it does depend on the trajectory of the gas price over time. But with a change like this which we’re seeing in the wholesale market, there will be an impact that feeds through to customer bills.”
He added, “Changes in the wholesale price are going to be pretty difficult for customers to manage, not just through this winter but as those prices do feed through to bills later.”
Explaining the cause of the issues, he said, “There is clearly much higher demand than was anticipated by the markets and then there’s a series of factors internationally that are constraining supply.
“For example, it looks like there is little over and above long-term contracts coming from Russia and equally there are some issues with some of the liquefied natural gas (LNG) terminals, all of which means supply is constrained and demand is higher than you’d expect.
“That’s really what’s driving the price rises that we can see.
“In terms of duration, it is very, very hard to tell and our view is we need to be open minded about how long it might last, and for a range of scenarios.”
Brearley added, “All consumers in this market are protected by the price cap and the price cap does provide a fair reflection of the costs that are in the market.
“When you look at the wholesale costs that are there now, the price cap is providing good value for customers and so we feel that, in these extraordinary times, we do have measures in place that protect customers’ interests.”